With EPS Growth And More, Kelington Group Berhad (KLSE:KGB) Makes An Interesting Case

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Kelington Group Berhad (KLSE:KGB), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Kelington Group Berhad with the means to add long-term value to shareholders.

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Kelington Group Berhad's Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. To the delight of shareholders, Kelington Group Berhad has achieved impressive annual EPS growth of 56%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Kelington Group Berhad's EBIT margins have actually improved by 4.2 percentage points in the last year, to reach 13%, but, on the flip side, revenue was down 21%. While not disastrous, these figures could be better.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

View our latest analysis for Kelington Group Berhad

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Kelington Group Berhad.

Are Kelington Group Berhad Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Kelington Group Berhad followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they hold RM99m worth of its stock. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 4.1%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Should You Add Kelington Group Berhad To Your Watchlist?

Kelington Group Berhad's earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Kelington Group Berhad for a spot on your watchlist. It is worth noting though that we have found 1 warning sign for Kelington Group Berhad that you need to take into consideration.

Although Kelington Group Berhad certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Malaysian companies that not only boast of strong growth but have strong insider backing.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.